Mistakes that Could Cost You Your Credit

There are obvious reasons that could drag our credit scores downsuch as defaulting on loans, getting a judgment, home foreclosure, and filing bankruptcy. However, there are several factors that could affect our credit score that we are not commonly aware of. Here they are.

Late payments

About 35% of your credit score is made up of your payment history. Being late consistently on your payments will have a huge impact on your credit rating, so always make it a habit of paying your bills on time. Furthermore, completely ignoring your bills may lead to charge-offs, which will have a more detrimental effect.

Overusing all of your available credit

The second highest component of your credit score is credit utilisation, which is the ratio of your balances to your actual credit limit. Having a high balance in relation to your credit limit will increase your credit utilisation, which will in turn, lower your credit rating. Ideally, you should keep your credit card balances below 30% of the available credit limit to keep your credit score healthy.

Closing old accounts

The length of your credit history makes up for about 15% of your total credit score. Whenever you’re applying for a loan or line of credit, the lender will look into how long since you’ve started getting credit. This is why you shouldn’t close old credit cards, even if you’re not using them anymore because it would make your credit history appear shorter. More importantly, you shouldn’t close accounts with balances on them.


Too many inquiries

Each time you apply for credit, the lender or provider automatically posts an ‘inquiry’ in order to access your credit report. An inquiry is a record that lists down who pulled out your credit report and when. This accounts for about 10% of your credit score. Since it is a statistical fact that borrowers with a higher number of inquiries tend to be riskier than those with fewer inquiries, credit bureaus can lower your credit rating if they found out that you are excessively shopping for credit.

Having only one type of credit

While it’s wise to be careful about using credit, it’s not advisable to avoid credit altogether. Having only one type of loan or credit card could also affect your credit score because 10% of it comes from the mix of credit that you have. Having several types of loans and lines of credit means that you are more capable of managing your credit properly.

Settling your debt

Debt settlement means that you’ve made an arrangement with your creditor to pay an amount significantly smaller than what you originally owed. While it may seem like you were able to cut costs, you are not doing your credit score any favour. Settling your debt will not stop your creditor from reporting the situation. If you’re having difficulties paying back the loan, the best way is to talk to your lender and come up with a reasonable payment term that would help you finish off the repayments over time.


Carrying balances

Constantly leaving balances on your revolving credit can hurt you in so many ways. First, it increases your credit utilisation. Second, it hurts your credit rating because it would appear that you are not attending to your bills. Lastly, carrying balances repeatedly can cost a lot of money over time.


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Top Tips For Finding the Best Loan Deal

Looking to borrow some cash but are worried about the consequences? Follow these top tips to make sure that you nab the best possible loan deal.

Have a healthy credit score

Before you run to any particular lender, the first thing you need to do is check on your own credit rating. As expected, the better your credit score is, the better your chances are to get accepted and to get a reasonable deal. Even if you haven’t started on one yet, take the time to research so you could have an idea how much the lender will most likely charge.


Know all the fees

Many borrowers commit the mistake of looking solely at the loan’s interest rates. However, there could be many fees associated with the loan, such as processing fees, late fees, early repayment fees, etc. It’s important to be aware how much the loan could cost you should you be late or cannot afford to meet your scheduled repayment. Additionally, even if you originally haven’t planned on paying the loan back in full sooner, it would be wise if you can do so without any penalties should you have the needed cash to pay off the full balance.

Do not apply for too many loans

Whenever you apply for any type of loan or credit, the lender will have to pull out a copy of your credit report. Unfortunately, too many inquiries could be seen as a red flag, and providers tend to be hesitant on granting your application. You should space out your loan applications and aim to apply only when the chances of getting approved are high.

Borrow only what you need

Borrowing a smaller amount of loan could mean that you’d have to pay higher in interest rates as compared to when you borrowed a larger amount. Still, a smaller loan helps you to qualify more easily because the risk is lower. In addition, a smaller loan means you could finish off with your repayments sooner and the chances of default are much lower.

Be ready to bargain

Negotiating is a skill that you shouldn’t take for granted whenever you’re shopping for a loan. Even if you’re not the best haggler, it shouldn’t hurt to ask if there’s any way that you could pay less. And even if you don’t have the most impressive credit history, you shouldn’t simply accept the first option that was thrown at you.

Shop around

Whatever type of loan you are looking to get, it always pays to explore your options. Most often than not, the first deal you’ve found is not always the best. There are many comparison sites online that should give you a quote across different lenders so that you can find the most affordable rates without even leaving your home.

Read the fine print

There’s a reason those contracts consist of too many pages, sometimes printed in very small fonts. Many lenders want to make sure you miss out on those important terms and remain unaware of the traps. To avoid this, always take the time to check the small print, and, even better, bring someone to double check with you.



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